Tuesday, October 16, 2007

The Malaise at Microsoft

In a business school case (Rohm & Haas), we learned about how channels of distribution were critical to a new product's success. I have added a brief description of the case below.
Joan Macey, Rohm and Haas' market manager for Metalworking Fluid Biocides, found that sales of a new biocide, Kathon MWX, was utterly disappointing. This was all the more puzzling since sales of her other product--Kathon 886 MW, a liquid biocide used only in large-capacity tanks--was well on target and held a steady 30% market share. In May 1984, about five months after the new product was launched, Joan Macey was reviewing her entire marketing strategy with a view to bringing Kathon MWX sales closer to target. Of particular concern to her were the distribution and communication strategies used for the new product.
Designed for Channel, not the end-user. The better product apparently cannibalized strong service revenue retailers were getting, and retailers really didn't have any incentive to sell the new product. Obviously, Microsoft has learned this lesson too well. That is the problem. It is obviously not enough that a product exist to help players in the value chain capture value, it has to create substantial value to the customer too.

Products don't solve a problem: Most products (including Vista) primarily seem to be designed to push more products and services to customers who really don't see a problem being solved.

Products create problems. In fact, most people I know have gone back to XP because all their software and peripherals (Camcorder, Palm software etc.) work with XP but not with Vista. These are people who prefer function to form.

Advice to product managers: talk to end users for product requirements, not just to channel partners.

How much is it again? Licensing is confusing. Now, that is an understatement. Because a lot of Microsoft products are sold through channel, Microsoft has to list really ridiculous list prices for their software. Other software vendors like Oracle also do so, but Oracle primarily deals with large enterprises, whereas Microsoft has a lot of small business customers. If I don't understand pricing, as an IT manager, I will go to a vendor who has a more transparent pricing model.
The licensing tool is an attempt to help with your pricing confusion and perhaps anchor a ridiculously high price as a reference point for you to begin bargaining.

Segmentation Gone Wild
Microsoft Dynamics, after several confusing name changes, has 7 products and each product has an average of 3 editions. Not only is this challenging for the customer to navigate through, it is challenging for the sales staff who has to be up to date on the features of each of those products. Is it really cost-effective to extract every ounce (or more) of value from your customers? Or is it poor post-merger integration?

Peanut Butter with your OS?
Yahoo executive Brad Garlinghouse wrote the Peanut Butter manifesto for Yahoo, but it applies to Microsoft as well. The software maker recently launched Real Live Moms, a Live Spaces site that exhorts moms to be "the most spirited mom in the block" (sic) and other spaces to promote its "community." It may be time for a talk about the problem of spreading resources too thin and shoddy execution on products.

Outlook: I'm moving to GAPE!
As SAAS offerings like Google Applications Premier Edition are beginning to provide rich functionality, avoid issues like local storage, and provide a clear pricing structure ($50/user annually), I expect more small businesses to move to such products. Also, improvements to Google Gears may take care of times when your network go offline for brief periods.

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